Death and Taxes: Free Riding on Free Riding

Today it is nigh impossible to find a mainstream economics textbook that does not make the distinction between private goods and services on the one hand, “for which the truth of the economic superiority of capitalist production is generally admitted”, and public goods and services[1] “for which it is generally denied” on the other (Hoppe, 1989b). But does this make sense? We are inclined to wonder where this distinction comes from and why market mechanisms would be applicable to and preferable for the creation of some goods and services (private), yet inapplicable to others (public).

Generally, the reasoning is as follows: private goods like an apple, a haircut, a car, etcetera, are subject to private appropriation. He who does not pay for these goods is excludable from their consumption: if I eat an apple, somebody else cannot eat that apple as well, if a barber cuts my hair it was only my hair that was cut, and if I drive my car to point A then somebody else cannot use it to drive it to point B at the same time.[2] The determining distinction between private versus supposedly public commodities is “often made in terms of [this] excludability: in the case of private goods, the consumer is able to exclude all others from the benefits; in the case of public goods, he is not, and so some of the benefits spill over onto third parties”[3] (Block, 1983, emphasis added). Goods which are in other words non-excludable (i.e. their benefits cannot be restricted to those who have actually financed their production) are open to so-called free riders, who benefit from these goods without paying for them. Such free riding situations are consequently believed to “result in a reduced [or absent] frequency of the beneficial action, since many people will hope to get the benefit for free” (Lott, 2007) through the actions of other individuals, while refraining from undertaking those same actions themselves.

At this point I already wish to point out to my readers that this presupposes a dubious image of human society as composed of nothing but Buridan donkeys, who – in being both equally hungry and thirsty at once – when placed precisely midway between some hay and a pool of water are expected to die of hunger and thirst, because it is assumed that it would not be rationally possible for them to move in either direction rather than the other. It is doubtful that a donkey has ever died in such a way. Yet it is as we shall see at its core precisely this absurd scenario – not a possible concern about investors not getting what is due to them – which among various utilitarians of all kinds and denominations “often elicits demands for State subsidies to encourage the valuable activity” (Lott, 2007, emphasis added).[4]

For example, if somebody pays guards to patrol around his house, then the neighbours in the surrounding houses also benefit from this added security even though they did not pay for the guards. If A installs a streetlight, all the other inhabitants of the street and the people who merely drive through it benefit from this as well: it costs them nothing to benefit from the light, and since they did not voluntarily agree to pay for its installation they cannot justly be forced to contribute to its maintenance or production by A who did pay for it.[5]

In earlier times, when lighthouses were still a necessity, all sailors profited from their construction even though they might not all have contributed to the construction or the operational costs. Because of this, it is claimed, when it comes to non-excludable goods, nobody has a sufficient incentive to bear the cost of producing them without the ability to make others who also benefit pay along. And since consequently everybody will wait for somebody else to provide them with these non-exclusive goods for free, there will necessarily be a de facto market failure, since the market will be unable to provide these desperately needed goods as a result of this lack of excludability. It is in order to rectify this dreaded situation that the State is franticly called upon by most modern economists (and the general public as a whole) to take part in the overall production process through the production of public goods; i.e. goods and services which “due to their nature and characteristics would not be provided by a free market” (Berlage et al, 2000), “or at least not in sufficient [6] quantity or quality” (Hoppe, 1989b, emphasis added).[7] The costs of both production and operation of these public goods and services are to be paid for by the State through what is known as taxation, i.e. the coercive extraction of resources from potentially unwilling human beings (to which we will come back specifically in a moment).

It immediately becomes apparent by even the most superficial examination of the distinction between private and public goods that something is amiss. If the criterion of non-excludability (and particularly its supposed negative consequences like “inadequate” production as described above) is to set the qualification of a certain good, we immediately run into some inescapable contradictions, no matter which way the concept of separate and distinct kinds of goods (private versus public) is approached.

For instance, some goods that have been (and to varying degrees still are) considered to be public goods and services (railroads, postal services, telephone services, streets,[8] energy services…) can in fact readily be restricted to those who use and finance them, “and hence appear to be private goods” (Hoppe, 1989b, emphasis added).[9] Vice versa, goods and services that are generally considered to be private clearly also have a public component due to the non-excludability of their benefits: when A puts a new coat of paint on his house, this benefits those living in or simply driving through his street as well, even though they did not finance either his house, the paint or the labour costs of the painter (whether this was A himself or a professional painter whom A hired).[10]

The same is true even on much more abstract levels, and perhaps more importantly so as these instances of externalities are so easily and frequently overlooked. When July buys some gloves to help her through the winter, it is she alone who gets the benefit of wearing them – no one else. However, when she gets an inoculation against the flu, it is “a commodity which is not subject to the exclusion principle. While [July] gets benefits from having the shot, the benefit is not exclusively hers. Having become immune to the disease, she cannot communicate it to other people”. The people who – unlike July – did not pay for the shot (be it in terms of money or discomfort) “cannot be excluded from the benefit of the shot, even though they did not pay for it and even though the person who received the shot cannot charge them for it” (Hayeman, 1970). In similar fashion, if July gets a haircut, some effects of this might spill over to others: her well-groomed appearance might be very pleasing to those who see her walking by. But at the same time it might annoy and thereby negatively affect other possibly insecure women who are perhaps jealous when their partners look at her. Indeed, “even those people who do not throw money in his hat can profit from a street musician’s performance. Those fellow passengers on the bus who did not help you buy it profit from your deodorant. And everyone who ever meets you [profits] from your efforts, undertaken without their financial support, to turn yourself into a most lovable person. Now, do all these goods – property improvements, street music, deodorants, […] – since they clearly seem to possess the characteristics of public goods, then have to be provided by the State or with State assistance?” (Hoppe, 1989b).[11] Does this signify that since other people are affected and cannot be excluded from the (positive or negative) effects which they did not finance, July’s haircut is thereby in fact a public good and rationally could not have been privately produced? And if it does not, then what is the difference with other public goods? Perhaps A is allowed to charge others for her haircut since they benefit from it, and could it be that she at the same time has to compensate others who dislike it? And what mechanism made July get a haircut, a vaccination or deodorant in the first place, even though not all people who benefitted from it could be made to contribute to her investment? In short, why did the non-excludability not keep her from funding these goods and why did she not care about free riders when she paid for it all?

As these various examples of privately produced “public goods” indisputably show, “there is something seriously wrong with the thesis of public goods theorists” who claim “that public goods cannot be produced privately, but instead require State intervention. Clearly, they can be provided by markets” (Hoppe, 1989b, emphasis added), they have been provided throughout all of human history, and are in fact being provided right now. To illustrate, postal services have switched several times and under differing conditions from being considered at some point public and at another private services.[12] Streets were historically privately financed and owned, and as any visit to France and several other countries will show, in various instances still successfully are.[13] Even the lighthouses mentioned earlier were in fact the result of private investment: “since most of the benefit of a lighthouse accrues to ships using particular ports, lighthouse maintenance fees [were] often profitably bundled with port fees” which was sufficient to produce and maintain them (Coase, 1974).[14] What is more, “private police forces, detectives, and arbitrators exist[15]; and help for the sick, the poor, the elderly, orphans, and widows has been a traditional concern of private charity organizations.[16] To say, then, that such things cannot be produced by a pure market system is falsified by experience a hundredfold” (Hoppe, 1989b). In short, “a clear-cut dichotomy between private and public goods does not exist […]. All goods are more or less private or public and can – and constantly do – change with respect to their degree of privateness [or] publicness […].[17] They can never be private or public goods as such” (Hoppe, 1989b, emphasis added). The simple fact that so many goods and services have flipped between these two distinctions several times over should on its own serve as sufficient proof of the arbitrariness of this distinction for the non-dogmatic among us.

The demarcation between a private and a public good and the inherent State-enforced treatment of it as such is in other words completely illusionary at best and wildly arbitrary at worst. There are in short two questions involved in these free riding situations: “do others benefit from your action? And if so, is it possible to prevent them from getting this benefit” (Lott, 2007)? As we have seen, it is when it is not possible to exclude others from such benefits that a free riding “problem” is thought to develop.

But if there is anything that the market – i.e. intelligent and ambitious people with self-interested profit motives and the freedom to voluntarily pursue them – is good at, it is finding solutions to seemingly unsolvable problems.

This matter of fact can be demonstrated with an everyday example, which is a telling case of what lurks around the corner when we leave the door open for public goods theorists to meddle in free market affairs. I am referring to the romantic yet crucial link between beekeeping and apple farming (Cheung, 1973). As the story of the flowers and the bees teaches us, bees feed on the nectar of blossoms and thereby unwittingly – as they jump from blossom to blossom – pollinate the trees and flowers which they visit. But alas, some gravely and selflessly concerned economists, apparently unhindered by a dash of common sense, feared that “apple growers were free riding from neighbouring beekeepers, and that this would even­tually result in too few apples as well as too little honey” (Lott, 2007). Surely, the disastrous amount of free riding involved could ultimately only lead to the disappearance of both apples and bees. Beekeepers, so distraught by their neighbours freely benefitting from their presence, were expected to stop producing honey, kill their bees and halt all their productivity in outraged protest if they only were to suddenly realize how gravely they were being exploited and abused. That no such thing happened or seemed to be happening was beside the point: obviously free riding was involved and it could therefore end in no other way. Or could it?

It turned out that some orchard owners simply had their own bee hives and produced honey as well, but the most frequently applied solution was that both beekeepers and orchard owners had a mutual interest in cooperation and this cooperation had been formed naturally and voluntarily through free market exchanges (Cheung, 1973). This was, among other things, evidenced by the fact that the “Yellow Pages in rural Washington State developed long listings of pollination services available to farmers. Yet, despite the evolution of free market solutions, beekeepers cited the existence of this potential free riding situation as an excuse to lobby the State to implement a honey price support program” (Lott, 2007). The subsidies started out small in the early 1980’s, but as is to be expected when other people’s money is being handed out and there is no personal incentive to keep costs in check, they “quickly grew into a massive subsidy scheme costing U.S. taxpayers around $100 million annually by 1984” (Muth, 2003).

Similar stories abound. I expect that most if not all of my readers know – and take for granted – that the activity of commercial radio broadcasting is paid for through the selling of advertisement time between songs and programs.[18] This is what not only recovers the cost but also allows for profits to be made (which can then be invested in new programs or other ventures and so on). Yet, to the best of my knowledge, very few people realize that potential free riding “problems” initially seemed almost insurmountable in providing radio services. At the dawn of radio broadcasting, a true conundrum presented itself to radio enthusiasts, making many believe that mass broadcasting would die out before it even started. The problem? No one could figure out how to make listeners pay. Anybody who bought or simply made a rudimentary receiver was able to tune in to any available channel within broadcasting range for free.[19] Due to the inherent nature of radio waves it was at the time impossible to limit the reception of certain radio channels to only those people who subscribed to them.[20] As a necessary result, entertainers and broadcast technicians of all sorts were usually working for free on their own spare time, even if it meant that they had to bear the costs of their hobby while others benefitted from their time and investment, in what was then extremely expensive state of the art technology (White, 2009).[21] But this obviously did not stop people from making radio broadcasts anyway. Even so, by 1922 an article in a magazine called “Popular Radio” claimed that radio was “essentially a public utility” and that the State was therefore to take charge of the production of radio broadcasting services due to the obvious free riding involved (Kaempffert, 1922).

Never shying away from an increase in their own power, State officials were set to do just that, even though the frantic claims of the disappearance of radio broadcasting before it even started were debunked in factual reality through the growing number of people who were doing it voluntarily – simply because they wanted to, out of curiosity and amusement, even if it did cost them significant amounts of money and effort for which they got no (monetary) payment in return (White, 2009).

But if there is value in something, somebody always figures out a way to make a profit. And so it came to be that in 1922, AT&T[22], a company which still exists today as one of the largest corporations on the planet, discovered that it could recover its costs and on top of that turn out a profit by selling radio advertising airtime. With one simple but brilliant swoop, the “problem” of free riding (which did not cause any actual problems in the first place) was solved. In hindsight, “it is hard to believe that private radio almost died in its infancy because people could not figure out how it could make money” (Lott, 2007).

Of course, the gears were set in motion, and to this day several countries[23] still have nationalized radio and television broadcasts. These get paid for by every taxpayer, regardless of whether he or she wants to pay for these broadcasts or not (or whether he or she even has a radio or television), and regardless of the appeal of what is being broadcasted (which few or many of the taxpayers may find distasteful, inappropriate or uninteresting). These collectivistic entities are of course also often abused for various forms of propaganda of varying subtlety by their political benefactors.[24]

Let’s look at an example. In the UK, everyone who is able to receive any live television broadcast (whether it is through use of a television or a computer that is connected to the internet, a satellite dish, etc.) from any source (foreign or domestic, analog or digital) is forced to buy a so-called “television license” by paying a “television license fee” to the State. The money generated through this scheme is used “to provide radio, television and Internet content for the British Broadcasting Corporation (BBC)” (OPSI, 2004).

The fact that it is called a fee, like a fee one would pay for a visit to the doctor or in return for the advice of an accountant, does little to hide its true characteristics. UK citizens are required to “buy” the license by default, whether they watch the BBC through any of its channels or not, which exposes this “fee” for what it really is: just one more form of taxation.[25] “What’s in a name” (Shakespeare, 1595) is a frequently recurring question in dealing with the Newspeak[26] of collectivistic euphemisms.

If a commercial channel were to broadcast things which nobody watches, it would automatically and very quickly lose its funds – advertisement money – and go out of business. Nobody pays to advertise to a non-existent audience. But whether all of the UK populace or not even one single person actually watches the BBC, the BBC still gets its funds anyway. Additionally, every viewer watching the tax-funded BBC is one less viewer adding to the advertisement potential and content diversity of the commercial channels, who as a final absurdity are essentially forced to keep their State-backed competitors in the saddle through taxes on their profits which they by contrast did earn through market merit instead of through the use of political force directed against the taxpayer. This is true for any such State-run “enterprises” that supposedly[27] exist to provide “public goods and services”, be they State broadcasts, postal services, hospitals, schools, railways, mines or steel mills.

Like a reversed and institutionalized Midas which turns everything that it touches into muck, the State unfailingly completely distorts the market as a whole and creates enormous waste, inefficiencies, perverse incentives and outright corruption in the process. The true benefactors in the end always turn out to be anybody but the taxpayers themselves: ever more taxes are needed to provide ever less “public goods and services” as inefficiencies and corruption spiral out of control, unchecked by market forces and encouraged by limitless access to the bottomless trough of tax funds against which the individual is powerless and kept at bay at gunpoint. Subsidizing (often politically well-connected) unprofitable companies at the expense of profitable ones is thereby de facto a wasteful and immoral process in more ways than one.

Tragically, corporate subsidies often get passed off as a supposed failure of capitalism or the free market. Of course, this overlooks the real culprit! Corporate subsidies are de facto a result of State interventionism in the market: privatized profits and collectivised losses have by definition nothing to do with capitalism or free markets and have everything to do with the coercive apparatus of the State. They penalize the productive who make a profit through the economic means to subsidize the unproductive who extract their income through political means. In a free market, government intervention is by definition absent. It is only because government intervention is accepted by the public that politicians tend to be bought and paid for by large corporations who can use the coercive power of the State for their own gain. Public outrage is generally very lacklustre, while the lobbying of politicians by special interest groups is big business.[28] This is caused by the fact that the small payments by many taxpayers (which are not perceived to be large enough to mount serious protests over) translate into large profits for the comparatively few beneficiaries of the subsidies (for whom it is very much worth the investment of paying off politicians).[29]

Undeniably, a lot of people enjoy watching the BBC or for example use some State-run public transport to get to work. But that gives no explanation or justification whatsoever as to why even those who do not enjoy it are forced to pay for its funding anyway.

If a lot of people enjoy the company of dogs and cats in the same numbers and to the same degree as some people like watching the BBC, few – one can only hope – would argue that this is sufficient reason to enforce pet food taxation onto the whole populace – including even those who are perhaps afraid of or allergic to cats and dogs – in order to provide the subsidies for those who do happen to desire a pet. Common sense says that those who want a pet do not have the right to forcefully expropriate other people’s money to pay for its upkeep. But the fact of the matter is that in the case of the BBC and its peers – fully in line with all subsidized entities and “public goods” in whichever shape or form imaginable – this basic a priori behavioural pattern of civil human interaction is boorishly shoved aside. After all, who would tell the plebs what to think if the State were not there to force them to pay for State approved content?

Yet who has ever heard the BBC being accused of free riding on the backs of its commercial counterparts? And what about the free riding by non-UK citizens who watch the BBC? Was it not in order to prevent free riding that broadcasts were supposed to be in need of nationalisation in the first place?

Such is the “logic” of State interventionism, and such are its “solutions” to problems of its own creation. Indeed, “government is good at one thing: it knows how to break your legs, hand you a crutch, and say: ‘see, if it weren’t for the government, you wouldn’t be able to walk’” (Browne, 2002).

If we now return to our examination of the early days of radio broadcasting, while keeping in mind the way commercial media works today, it is at best “highly unlikely that the State would have distributed payments as efficiently as advertisers do”.[30] The better a company serves its audience, the more valued its advertising airtime will be and consequently the more advertising money it can bring in. The market mechanisms which dictate the value of airtime in effect simultaneously allow the most valued broadcasters who serve their audience best to enjoy their success, and ensure that the bad ones are naturally “weeded out” as they respectively gain and lose advertisement money. These same mechanisms operate for any good and any service along the same principles, and this withoutany State intervention whatsoever and without anybody being forced to “buy” things which they do not want.

As these examples show, companies and individuals alike “find amazingly creative ways to solve free-riding situations, while government subsidies only deaden the incentive to discover these solutions” and create problems where none existed before (Lott, 2007).

But even if we were to ignore the lessons provided by the above examples,[31] this does not in itself lead to a justification or reason as to why “public goods – assuming that they even exist as a separate category of goods – ‘should’ be produced at all, nor why the State rather than private enterprises ‘should’ produce them” (Hoppe, 1989b, emphasis added). In other words, even if free riding were to actually cause the problems ascribed to it, somehow contrary to what is observed in practice, this does not default into a situation where State intervention (which de facto implies force) is justified.

Essentially, public goods theorists claim that “the positive effects of public goods for people who do not contribute anything to their production or financing proves that these goods are desirable. But evidently they would not be produced, or at least not in sufficient quantity and quality, in a free, competitive market, since not all of those who would profit from their production would also contribute financially to make the production possible.[32] So in order to produce these goods (which are evidently desirable, but [are thought] not [to] be produced otherwise), the State must jump in and assist in their production. […] For one thing, to come to the conclusion that the State has to provide public goods that otherwise would not be produced, one must smuggle a norm into the chain of reasoning. Otherwise, from the statement that because of some special characteristics they have, certain goods would not be produced, one could never reach the conclusion that these goods should be produced” (Hoppe, 1989b, emphasis added). It is important to let this sink in.

Once the concept of public goods is invoked, the study of economics – which as a science can only be described in such terms when it is objective, there are no ethics involved in the science of mathematics, physics or chemistry either – gets diluted with inherently subjective ethics and the false presumption of their universality that is to outweigh the normative ethics of others through force.[33]

In the end, all utilitarian efficiency arguments[34] for the use of force are irrelevant from the start because “there simply exists no non-arbitrary way of measuring, weighing, and aggregating individual utilities or dis-utilities that result from some [enforced] allocation of property rights” as opposed to their unadulterated natural order. “Hence any attempt to recommend some particular system of assigning property rights in terms of its alleged maximization of ‘social welfare’ is pseudoscientific humbug” (Hoppe, 1989b, emphasis added). In order to arrive at the conclusion that the State has to provide the production of this or that public good du jour,[35] it can only imply that whenever it is somehow shown that the production of a particular good or service has a desirable effect – by whatever whimsical and subjective standard of one or more people – but would perhaps not be produced at all, or “not in a definite quantity or quality unless certain people participated in its financing, then the use of aggressive violence against these persons” whose contribution is somehow deemed to be needed is magically allowed, “either directly or indirectly with the help of the State, and these persons may” then morally and practically “be forced to ‘share’[36] in the necessary financial burden” (Hoppe, 1989b, emphasis added).[37]

But all that this subjective feeling of entitlement over other people’s property[38] and the use of force and aggression “for the greater good” amounts to is ultimately the conclusion that anyone can attack anyone else whenever he feels like it. All the aggressor needs to do is prove that, by some subjective standard (his own suffices), “society” would benefit from such tinkered redistribution of the costs for this and that “public good”. If Statists are to be believed, the greater good by any standard – their standard – is supposed to trump all else; even individual self-ownership when it really comes down to it.

It is quite clearly possible, and indeed known and shown to be a fact, that anarchists exist, your humble author among them, “who so greatly abhor State action that they would prefer not having the so-called public goods at all to having them provided by the State. […] To [simply] leap from the statement that the public goods are ‘desirable’ to the statement that they should therefore be provided by the State is anything but conclusive” (Hoppe, 1949b). The conception of any good as “public” – and therefore to be funded and enforced by the State – is entirely subjective: if it were objective then such a good could not flip between private and public over time any more than the sum of one plus one could objectively change from two to three.

In short, enforcing such subjective norms through State coercion on disagreeing others from behind the thin veil of universalist pretentions and bombastic paternalism can bear no moral justification whatsoever.

Footnotes

[1] Hereafter, I will refer to “goods and services” as simply “goods”.

[3] Such a spill-over (which can be positive and negative) is known in economics as an externality.

[4] With “valuable” being an entirely subjective valuation depending on who is asked. See what follows.

[5] If A mows your lawn even though you never asked him to do this, he cannot force you to pay for the mowing of your lawn simply because you benefitted from it. If one day you return from work and discover that A painted your house in a different colour or tore down a wall with a sledgehammer without you ever asking him to do so, this does not give A any claims on you (even when A thinks he improved your house). Quite to the contrary: you could rightfully claim that he violated your property.

[6] It bears repeating: “sufficient” as such is an entirely subjective valuation, not an objectively measurable characteristic of total production.

[7] “Another frequently used criterion for public goods is that of ‘non-rivalrous consumption’. Generally, both criteria seem to coincide: when free riders cannot be excluded, non-rivalrous consumption is possible; and when they can be excluded, consumption becomes rivalrous, or so it seems. However, as public goods theorists argue, this coincidence is not perfect. It is, they say, conceivable that while the exclusion of free riders might be possible, their inclusion might not be connected with any additional costs (the marginal cost of admitting free riders is zero, that is), and that the consumption of the good in question by the additionally admitted free rider will not necessarily lead to a subtraction in the consumption of the good available to others. Such a good would be a public good, too. And since exclusion would be practiced on the free market and the good would not become available for non-rivalrous consumption to everyone it otherwise could – even though this would require no additional costs – this, according to statist-socialist logic, would prove a market failure, i.e., a suboptimal level of consumption. Hence the State would have to take over the provision of such goods. A movie theatre, for instance, might be only half full, so it might be ‘costless’ to admit additional viewers free of charge, and their watching the movie also might not affect the paying viewers; hence the movie would qualify as a public good. Since, however, the owner of the theatre would be engaging in exclusion, instead of letting free riders enjoy a ‘costless’ performance, movie theatres would [if we were to follow this kind of logic through] be ripe for nationalization” (Hoppe, 1989b, emphasis added).

[8] See what follows and, among many others, (Block, 1980/1983/2009), (Tucker, 2009).

[9] These types of companies, when State-run (i.e. taxpayer funded), tend to be textbook examples of mismanagement and corruption. More on this later.

[10] The opposite can happen as well, as a recent debate in the US has shown. After taking a class that covered global warming, some people in Ohio who lived in a private community in the form of a mobile home park – i.e. where one knows that buying property there means abiding to privately agreed upon rules in the same way one takes out a mortgage under the acceptance of the rules that the money will be used to buy a house and not a cruise around the world – decided to save energy by drying laundry on a clothesline at their mobile home. However, “Ms. [X] was forbidden to dry her laundry outside because many people viewed it as an eyesore, not unlike storing junk cars in driveways, and a marker of poverty that lowers property values”. This was agreed upon when she bought her spot in the private community just like people often agree to pay for the wages of the staff that maintains their apartment building when buying property in it. In spite of this, “State lawmakers in Colorado, Hawaii, Maine and Vermont have overridden these local rules with legislation protecting the right to hang laundry outdoors, citing environmental concerns since clothes dryers use at least 6 percent of all household electricity consumption”. Not too surprisingly, “the new laws have provoked a debate. Proponents argue they should not be prohibited by their neighbours or local community agreements from saving on energy bills or acting in an environmentally minded way. Opponents say the laws lifting bans erode local property rights and undermine the autonomy of private communities. […] It seems like such a mundane thing, hanging laundry, and yet it draws in all these questions about individual rights, private property, class, aesthetics, the environment”. But the answer to this question is provided in the article itself: “when it comes to clotheslines, it should be up to each community association, not State lawmakers, to set rules, much like it is with rules involving parking, architectural guidelines or pets” (Urbina, 2009). In similar vein, for a thorough explanation of how zoning rules could come into existence in a free market system, see (O’Neill, 2009) and (Camplin, 2010).

[11] 1st person perspective in the original text was changed to 2nd person perspective by myself.

[12] For a worldwide overview of all existing postal services and their modern histories (like the return to privatization after the failure of nationalized structures), see (UPU, 2009).

[14] But even so, “the lighthouse […] is a public good only insofar as the sea is publicly (not privately) owned. But if […] pieces of the ocean [were] private property, as it would be in a purely capitalist social order, then as the lighthouse shines over only a limited territory, it would clearly become possible to exclude non-payers from the enjoyment of its services” (Hoppe, 1989b, emphasis added). The positive effect of private property over presently “unlikely” resources is also seen in terms of the handling of pollution. Take the example of African environmental conservation: hunting on private reservations in Africa has actually increased the population of African wildlife. “Trophy hunting is a specialized form of tourism through sustainable wildlife utilization. It is the practical application of ‘Incentive-Driven-Conservation’. The World Conservation Union (IUCN), gathered at the 3rd World Conservation Congress in Bangkok in November 2004, has adopted a recommendation on sustainable consumptive use of wildlife and recreational hunting in Southern Africa proposed by the Game Rangers Association of Africa, the Endangered Wildlife Trust and the South African National Parks. With this Recommendation, IUCN accepts that recreational hunting has a role in the managed sustainable consumptive use of wildlife populations” (Damm, 2007). Yet, “free-market societies are under fire from environmentalists today for supposedly ruining the planet. But the passionate debate about global warming and the moral implications of waste and pollution has arisen only in politically free societies. Moreover, as governments debate whether global warming is really man-made, economic actors have already begun to incorporate these concerns into their production and investment. They have begun taking measures to build more fuel-efficient cars and to create affordable systems to provide alternative sources of energy. Greener-than-thou marketing is a strong force among a certain sector of consumers. Corporations and firms do this because they are rational economic actors. Companies that are greener make more profits than those that are not” (JTF, 2008). Also see (Loveridge, 2006) and (CIC, 2007) for an overview of articles discussing the positive effects of private game hunting on wildlife in Africa.

[15] Throughout history, rewards have been given out by private (groups of) citizens for the return of stolen property or for the apprehension of criminals. More importantly, voluntary mutual protection due to aligned interests has always been ingrained in human societies but is usually suppressed through State coercion and enforced dependency on State policing. Millions of examples are readily available. Here are a few random ones which occurred close to the time of writing of this paragraph. During racially motivated riots in an American city in 2014, when the State police forces abandoned the area and left local business owners and inhabitants without any protection from their tax funded supposed protectors, a “group of residents who happened to have dark skin, armed with pistols and AR-15 rifles, descended upon a business which happened to be owned by a person with light skin. These four men stood outside of this business, […] to protect it from rioters and looters who burned other businesses to the ground over the past week in the […] area. The reason these […] brave men protected this business had nothing to do with their skin color nor the skin color of the owner of the store. These men were protecting the […] gas station owned by Mr. DM, because he has employed them over the years. They had mutual interests in the store’s survival as well as respect for one another” (FTP, 2014). During those same riots, a group of 20 business owners along with their friends and family, “with handguns and AR-15 rifles stood around the perimeter of the [shopping area] parking lot, guarding the dozen or so stores” (STL Today, 2014). Similarly, but on a much larger scale, “the explosion of piracy off the coast of Somalia, which reached its peak between 2008 and 2010, led to a similar explosion in the maritime security industry. International naval patrols struggled to cope with the vast ocean area in which the pirates operated. So, private companies, many of them British, stepped in to fill the gap by providing armed guards for merchant vessels. Somali piracy has reduced dramatically as a result” (BBC News, 2014). For an interesting look at market based justice and protection systems during the colonization of the American continent, I recommend (Anderson et al., 1979). For more general information on the subject, you can search online for voluntary mutual protection, private security, etc. to find recent examples as you are reading this book.

[16] Note that “it is not possible, ever, for government to tax one set of persons and redistribute the same amount to a set of subsidy recipients. Some fraction of each dollar taxed will always be absorbed in wages and salaries of the administrative bureaucracy, costs of purchasing, powering, maintaining and replacing equipment, buildings, etc., and other overhead costs. Only the remainder will actually be received by the target population in the form of cash or in kind payments. Many advocates of compulsory income redistribution have tended to ignore this inconvenient fact altogether in their writings. […] Indeed, most of the public discussion proceeds with an implicit assumption of costless, dollar-for-dollar income transfers. […] Even more sophisticated analysts, such as Arthur Okun (1979), have simply asserted, without citing evidence, that such ‘leakages’ are small, amounting to only a few cents per dollar. This erroneous view dominates the academic and political classes. Of course, it is also true of private charities dependent on voluntary donations that they have costs absorbing part of their revenue, but there is a huge difference in the efficiency with which they operate relative to government. Contrary to Okun, public income redistribution agencies are estimated to absorb about two thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three quarters of each dollar. Using government data, Woodson (1989) calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Tanner (1996) cites regional studies supporting this 70/30 split. In contrast, administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients. Charity Navigator (www.charitynavigator.org), the newest of several private sector organizations that rate charities by various criteria and supply that information to the public on their web sites, found that, as of 2004, 70 percent of private charities they rated spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent. The median administrative expense among all charities in their sample was only 10.3%. The basic reason for this large differential in costs between private and public agencies is not difficult to see. Depending on voluntary contributions, private agencies are under strong pressures to operate efficiently and keep costs low. Benevolent citizens naturally wish a large fraction of their donations to reach the needy, and many will not keep donating to an agency that does not accomplish that. Donors can freely select among private non-profit charities, and competition between charities for donations tends to insure efficiency. Public aid agencies, in contrast, are budgeted their funds by the State, which obtains them through compulsory taxation. These agencies are not under competitive pressures to keep costs down that are remotely equivalent to those of private charities. Indeed, their incentives may be much the opposite (Niskanen,1994)” (Edwards, 2007). For more on the historical organization of free market private charities and voluntary social security, see (Chodes, 1990). For the negative effect of government growth on private charity, see (Garrett et al., 2007). One more example which I cannot resist of including is the following: South Africa “is a nation racked by poverty, where 13 million people survive on less than £1 a day, and two million have no access to a toilet. Yet as his people struggle in squalor, South African president Jacob Zuma has sparked outrage by spending £17.5million to upgrade his rural family home. Lavish works – which include the construction of 31 new houses, an underground bunker accessed by lifts and a helipad – will cost almost as much as the £19million British taxpayers send to South Africa in annual aid” (Jones, 2002).

[17] See the example of roads, postal services; indeed anything at all when comparing capitalist versus collectivist societies.

[18] Of course, the same applies to many other forms of content on the internet, etc.

[19] Or at least without any payment to the makers of the radio programs they could receive.

[20] With modern technology it would be possible to encrypt the broadcasts and thereby solve the problem through renting out receivers capable of decryption only to paying subscribers, much like modern satellite services now sometimes do. Of course, at the time of the first radio broadcasts this was due to the general state of technology not yet an option.

[21] Some radio stations still do, for the same reason: simply because they enjoy doing it.

[23] Some active examples at the time of writing this book: Prasar Bharati in India, PBC in Pakistan, RTHK in Hong Kong, NHK in Japan, RTM in Malaysia, HRT in Croatia, ERR in Estonia, ARD in Germany, RTE in Ireland, RAI in Italy, RTCG in Montenegro, NPO in the Netherlands, BBC in the UK, NRK in Norway, YLE in Finland, RTVE in Spain, Canal 7 in Argentina, CBC in Canada, TN in Chile, teleSUR in Venezuela, ABC in Australia, TVNZ in New Zealand, TV Brasil in Brazil, Cubavisión in Cuba, SABC in South Africa, IBA in Israel, IRIB in Iran, Arte in France, ERT in Greece, RTBF and VRT in Belgium, etcetera.

[24] For example, the national broadcasting network teleSUR in Venezuela was created by former Venezuelan President Hugo Chávez with the specific intent of propaganda, and is “to offer a ‘Southern’ perspective, and combat what he [called] ‘the conspiracy’ by networks to ignore or ‘distort’ information from and about this region” (Harman, 2005).

[25] In most countries, the funds for the State-run media are just part of the State’s budget, drawn from the overall tax pool.

[26] From “The Principles of Newspeak”, an appendix to the dystopian novel Nineteen Eighty-Four by George Orwell: “Newspeak was the official language of Oceania, and had been devised to meet the ideological needs of Ingsoc, or English Socialism. […] The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of IngSoc, but to make all other modes of thought impossible. […] To give a single example – the word free still existed in Newspeak, but could only be used in such statements as ‘The dog is free from lice’ or ‘This field is free from weeds’. It could not be used in its old sense of ‘politically free’ or ‘intellectually free’, since political and intellectual freedom no longer existed even as concepts, and were therefore of necessity nameless. […] As we have already seen in the case of the word free, words which had once borne a heretical meaning were sometimes retained for the sake of convenience, but only with the undesirable meanings purged out of them. Countless other words such as honour, justice, morality, […] science, and religion had simply ceased to exist. A few blanket words covered them, and, in covering them, abolished them. All words grouping themselves round the concepts of liberty […], for instance, were contained in the single word crimethink, while all words grouping themselves round the concepts of objectivity and rationalism were contained in the single word oldthink. Greater precision would have been dangerous. What was required in a Party member was an outlook similar to that of the ancient Hebrew who knew, without knowing much else, that all nations other than his own worshipped ‘false gods’. He did not need to know that these gods were called Baal, Osiris, Moloch, Ashtaroth, and the like: probably the less he knew about them the better for his orthodoxy” (Orwell, 1949). The most famous examples of this Newspeak are the foundations of the collectivist society in the novel: “War is peace, freedom is slavery, ignorance is strength”. But not too surprisingly, “history has witnessed the failure of many endeavours to impose peace by war, cooperation by coercion, unanimity by slaughtering dissidents,” only to discover that “a lasting order cannot be established by bayonets” (von Mises, 1944). Newspeak can be observed in the real world through euphemisms as mentioned above, of which something like all that surrounds “political correctness” is just one more example. Also see in this regard the re-sentiment of master values by slave morality, which turns old virtues into vices and vice versa, as discussed in the previous Chapter.

[27] In reality, they exist to further advance the power and wealth of politicians and their cronies.

[28] For example, in 2011 there were an estimated 15 to 20.000 lobbyist active in Brussels, swarming around the EU institutions and trying to have laws written to benefit the corporate sponsors of the lobbyists, for example by setting certain criteria for subsidies or to increase entry barriers into certain markets or sectors to politically hinder competition. Hans-Peter Martin, an “Austrian independent MEP, has gone one step further by listing all lobby contacts on his website. Martin says on the site, ‘Offers to free luxury travels, gala dinners, test drives and spooky hikes – almost daily, lobbyists are attempting to seduce the independent MEP H.P. Martin. Within a week, the gift invitations exceeded the amount of 10.000 Euro. Simultaneously, aimed pressure is made to support or submit specific amendments to EU-directives’” (New Europe, 2011). When looking at the USA, research suggests the number of working lobbyists around 100.000, signifying an industry that “brings in more than $9 billion a year” (Fang, 2014). These people are not there out of the kindness of their hearts. They are there because they can direct the coercive power of the State apparatus against others for their own benefit, and politicians tend to be happy to get paid for it. This helps to explain, for example, the curious amount of Maseratis and Porches in the garage beneath the European Parliament (GeenStijl, 2013).

[29] 100 individuals or companies each paying 1 in taxes used for subsidies is not much for them individually, but if that 100 in taxes is given to 2 beneficiaries, they get 50 each (minus the politicians’ and bureaucrats’ cuts) and have a much bigger incentive to get organized to keep those cash flows going.

[30] University of Washington professor Jonathan Karpoff provided another striking example of how staggeringly wasteful and inefficient government action can be. “Karpoff studied the thirty-five government-sponsored expeditions, along with the fifty-seven privately funded voyages, that explored the Arctic, the Northwest Passage, and the North Pole from 1818 to 1909. Arctic exploration [at the time], like space missions [today], is an excellent example of a public benefit that many would assume could not be achieved pri­vately. Much of the exploration is similar to pure scientific research that offers no immediate commercial benefit. Compared to their private counterparts, government expeditions to the Arctic enjoyed much bet­ter funding, bigger ships, and crews that were over four times larger (averaging seventy members versus seventeen for private voyages). Nevertheless, public expeditions were more likely to end in tragedy – an average of nearly six crewmen died on government voyages, compared to fewer than one on the average private trip. Furthermore, government expeditions lasting over a year suffered scurvy rates that were four times higher, while the chance of losing a ship was over double that of private expeditions (Karpoff, 2001). Despite their smaller crews and lower funding levels, the private teams accomplished five of the six major Arctic discoveries. Karpoff elaborated some of the reasons behind these results. Gov­ernment expeditions had to operate by committee and political factors played a role in dictating their crews’ composition. Private expeditions, in contrast, were more efficient and much faster at learning from past experience. Perhaps most importantly, private voyages were more responsive to incentives for success – their decision makers directly bore the costs and reaped the benefits of their own actions” (Lott, 2007, emphasis added).

[34] Also see the horrendous effects, for example on fisheries, forests and so forth due to the so-called “Tragedy of the Commons” (Hardin, 1986): “The phrase tragedy of the commons, first described by biologist Garrett Hardin in 1968, describes how shared environmental resources are overused and eventually depleted. He compared shared resources to a common grazing pasture; in this scenario, everyone with rights to the pasture grazes as many animals as possible, acting in self-interest for the greatest short-term personal gain. Eventually, they use up all the grass in the pasture; the shared resource is depleted and no longer useful” (Spooner, 2013). A simple online search reveals nearly unlimited striking examples, , for example the dumping of nuclear submarines into the waters of the Arctic by the Soviet Union (Dattaro, 2015), political corruption regarding the depletion of natural resources of all sorts (e.g. poaching of South African Rino’s with the help of corrupt politicians (Alfreds, 2013)), the destruction of the Aral Sea (LR, 2015), many (State-run) mining activities destroying “common” and “unowned” stretches of land and sea under the blessing of paid off politicians, etcetera. Crucially, the solution here is clearly not additional State intervention, but – as shown in a previous footnote on private wildlife preservation – the clear demarcation of private property and the responsibility and long term preservation interests that come with it.

[35] What is a public/private good one day can, as we have seen, magically be labelled as private/public the next, depending on the arbitrary fancy of those lauded shapers of society who momentarily control the coercion apparatus of the State.

Christophe is a guns and gold loving anarchist from the geographical area known as Belgium. He spends his days slaying dragons and rescuing damsels in distress, invigorated by bathing in statist tears on a daily basis. He was put on this world to kick socialist ass and chew bubblegum – and he is all out of bubblegum.

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